Obama’s Foreclosure Settlement Plan

I read an interesting article today on an analysis of President Obama’s recent plan for “massive” mortgage foreclosure settlement written by Independence Title’s State Director of Information Capital, Mark Sprague. Sprague explains these changes will get the foreclosure market flowing again, settle lawsuits between banks and all 50 state attorney generals, and institute enforceable standards for foreclosures. However it will not: 1) punish banks much, 2) dramatically affect the housing market or 3) do much to help underwater homeowners.

“A one-time payment of $25 billion is more like an annoying tax bill for a group of banks that together took in revenue of $317 billion last year alone.” Furthermore “while these five banks [Bank of America, JPMorgan, Wells Fargo, Citigroup, and Ally Financial] do the paperwork and debt-collecting and such for more than half the country’s outstanding mortgage debt, they only have about $750 billion, or 8 percent of the nation’s total mortgage debt, actually on their balance sheets. In other words, these banks have direct power to work out only a small chunk of the nation’s mortgages.”

Sprague gave some really interesting city and state foreclosure statistics. “In December 2011, the Texas foreclosure rate was one in ever 1,133 mortgages.” Compare that to “Nevada’s one in 177, California’s one in 254, Arizona’s one in 357, and Florida one in 360.” Even better Travis County was one in 1919!